Speakers to carriers: all hail

Telecommunications carriers need to adjust to a new world in which content drives the communications economy and the conduits that carry data cost almost nothing, said a panel of speakers at the Carriers World Congress in Barcelona on Tuesday.

Revenues from basic telephony and Internet access are rapidly dropping, said Annelise Berendt, senior consultant at research and consulting company Ovum Ltd. Telecom carriers face new threats to their basic business, she continued, as cable television companies, for example, start offering voice and Internet services.

“You need to move up the value chain, or you’ll lose out,” she said, recommending that carriers move into the content business, traditionally a separate one from carriage. “There are a number of opportunities which you, as carriers, cannot afford to ignore.”

She cited ASPs (application service providers, which provide users with access to software via the Internet for a monthly fee) and Internet advertising as two examples of rapidly growing areas that carriers can potentially exploit. Ovum predicts that revenues from ASPs will total US$132 billion by 2006, she said, while Internet advertising revenue will reach $836 billion by 2005.

How carriers can get into the content business, she said, depends on their own market reach, the strength of their brand and the economics of content provision. “You might already own a major (Internet) portal,” she said. “Could you use that expertise to move into other areas of content?”

DSL (Digital Subscriber Line) technology offers telecoms an opportunity to offer fast, reliable access for ASPs and other content, such as digital television programming, she added.

“Even if you, as carriers, go no further in terms of content creation than the actual phone directory, you must understand the needs of the content business and how that business thinks,” she said.

Tim Magness, European marketing director for AboveNet Communications Inc., the Internet services arm of Metromedia Fiber Network, Inc., echoed Berendt’s thoughts about the importance of content. But the explosion of new media available via the Internet, he said, still has not been matched by the infrastructure to deliver it.

“The Internet is still congested,” he said. “It was not designed for the sort of content that we’re seeing,” such as ASPs. “No matter how strong the content you’ve got, if you can’t deliver it quickly and reliably, that’s a business model that will fail.”

Customers want affordable bandwidth that is predictable, reliable and scalable – readily expandable to meet new demands – he said.

Jeff Maynard, the founder and deputy chairman of the U.K.-based ASP NetStore PLC, offered his thoughts about the value for carriers of getting involved in his business. ASPs, he said, “generate traffic, which ultimately is what you guys are about.”

Further, ASPs can provide “lock-in” of customers, who are notoriously fickle about changing communications carriers, he said. Because NetStore has huge amounts of historical data on its servers for major clients of its applications, it’s not practical for those customers to change ASPs, Maynard said.

“You will only really lose the business if you screw up, in which case you deserve to lose it,” he said.

ASPs are “the power grid of computing. Very few of us generate our own power at home,” instead plugging in appliances to get electricity as needed from the grid. “Why wouldn’t we do the same thing with computing,” he said.

AboveNet, in San Jose, Calif., can be reached at http://www.abovenet.com/. NetStore, in Bracknell, U.K., is at http://www.netstore.net/. Ovum, with offices in London, Boston and Melbourne, can be reached at http://www.ovum.com/.